Chicago Sun-Times may have more time to negotiate terms of buyout

Sept. 29 deadline touted by Jim Tyree and company management is called 'posturing' by bankruptcy judge

WILMINGTON, Del. — Unions at Chicago's Sun-Times Media Group Inc. appear to have more time -- and leverage -- than originally thought as they negotiate terms of a $26.5 million buyout offer from Chicago financier Jim Tyree.

Although Tyree and company management have demanded repeatedly that the unions accept stringent terms attached to the deal by Sept. 29 or face liquidation, testimony in a Delaware bankruptcy court hearing Thursday suggested those threats were largely what U.S Bankruptcy Judge Christopher Sontchi called "posturing."

A lawyer for Tyree confirmed that terms stipulate he cannot walk away from the proposed transaction until early December unless he wants to lose a $500,000 deposit and more than $500,000 he has already spent trying to make the deal work.

"I have confirmed with my client that they have no right to walk away from this agreement if the union condition is not satisfied by Sept. 29," acknowledged Randall Klein, a partner with Goldberg Kohn in Chicago.

Noting the amount of money Tyree would forfeit by walking away, Klein said, "That is not where Mr. Tyree wants to be at the end of this process."

The admission came after Scott Cargill, an attorney for the creditors committee in the Sun-Times case, pressed the company's general counsel, James McDonough, about claims by management that Tyree would abandon the deal if the unions didn't capitulate by Sept. 29.

Even as the hearing was going on, Sun-Times Chairman Jeremy Halbreich was issuing a memo saying that if the union conditions were not met by Sept. 29, "the Buyer has said it will not close on the transaction," leading other parties in the case to move to "convert our bankruptcy case to a Chapter 7 liquidation."

Cargill, whose committee clients include Sun-Times unions, said in an interview that he and his staff had pored over the deal documents and could find no mention of the Sept. 29 drop-dead date. Instead, the documents said Tyree's investment group had agreed to give the company 90 days from the date of the agreement to meet its demands.

In separate interviews, Tyree and Halbreich acknowledged that the Sept. 29 date was not contractual. They chose it because it coincided with the date of non-union pay cuts and because they wanted to keep the heat on given the company's financial condition.

But Tyree emphasized that even if there is no agreement by Tuesday, there will likely have to be one in place by Oct. 8, when Sontchi will decide whether to approve the deal. Otherwise he will have nothing to approve.

"It's a matter of days," Tyree said.

Halbreich said he doesn't apologize "for focusing people's attention on the issue at hand."

The issue, he said, is that the company is running out of cash at a pace of $500,000 to $600,000 a week, according to testimony. Although it is possible Sun-Times Media could make it to December with cash on hand, the burn might compromise the company's ability to pay administrative claims. Sun-Times Media has about $20 million in cash from operations. It also hopes for a previously undisclosed insurance claim of $17 million to $25 million to be resolved sometime in the fourth quarter, Halbreich said.

"If that happens, it will buy us a lot of time," he said. "But there's no way as chairman of this company that I can ask my board to [count on that]," he said.

Tom Thibeault, executive director of the Chicago Newspaper Guild, which represents editorial workers at the company's flagship Sun-Times and at several of its 58 suburban papers, said he had already discounted the Sept. 29 deadline.

"We decided the 29th date didn't mean crap and that we wouldn't be pushed to the wall," he said. "I view [Thursday's courtroom drama] as a pretty loud roar from the bench saying, 'Stop this nonsense and negotiate.' The union wants to negotiate. We want the Sun-Times to survive. But it's not a one-way street."

Tyree and Sun-Times management have asked the unions to lock in "temporary" 15 percent cuts in compensation, accept frozen pension funds and give up seniority and other work rules -- demands Thibeault's union has rejected.

Union leaders have held continuous back-channel talks with senior company officials seeking to bridge the gulf but haven't interacted with Tyree, Thibeault said.

Tyree, who is restricted from negotiating directly because of labor laws, said he's not unwilling to hear good ideas but that there's not a lot of room for him or Sun-Times employees to maneuver. "I will clearly listen," he said, adding: "My goal is to have people who are happy and like going to work."